6 Common Effects of Inflation

Inflation is the general increase in prices of goods and services.

1. Erodes Purchasing Power: Decrease in purchasing power of currency due to rise in prices across the economy.
2. Encourages Spending and Investing: Cash will only lose value.
3. Causes More Inflation: The supply of money outstrips the demand. The price of money falls at an ever-faster rate.
4. Raise the Cost of Borrowing
5. Reduces Unemployment: Inflation can push down unemployment. Inflation and unemployment have an inverse correlation.
6. Increases Growth: Inflation discourages saving. There is a boost of spending and investing which leads to economic growth.

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